Holden commits $1 billion until 2022

Export deal expected soon as Holden commits more than $1 billion to local manufacturing until 2022 following a $275 million government subsidy.

March 22 2012

Toby Hagon

General Motors Holden today committed to investing more than $1 billion in local manufacturing to secure its Victorian and South Australian-based operations until at least 2022 following a $275 million government injection.

The government subsidies - $225 million from the federal government and $50 million from the South Australian government – will be matched by at least $1 billion from Holden’s US-based parent company, General Motors.

Minister for Industry and Innovation, Greg Combet, announced the federal government’s renewed support of the industry.

“The Gillard Government is committed to helping firms in the automotive supply chain improve their competitiveness and break into global supply chains,” read a statement from the minister’s office.

“This can only be done through a strong focus on innovation and productivity to drive competitiveness.”

Today’s announcement has been expected for months, with Holden chairman and managing director Mike Devereux making no secret of the company’s need for support.

However, while it was expected the government funding would run into the hundreds of millions of dollars, $275 million was towards the upper end of estimations.

“Co-investment of this kind is critical for our industry and helps Australia compete against other car making countries that protect their industries through tariffs and/or financial support,” said Devereux.

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“Holden will receive government co-investment of $275 million and directly invest well in excess of a billion dollars in the 10-year vehicle development and manufacturing program.

“The investment will help Australia retain its capability to design, engineer and build cars with two all-new vehicles going into production at Elizabeth, South Australia, in the second half of this decade.”

The money will go towards securing local production of two models plucked from within the GM product suite, giving Holden the flexibility to respond to changing market dynamics; over the last decade local car makers have been caught out by a dramatic shift from large cars towards small cars and four-wheel-drive-style SUVs.

It’s not known what two models will be produced at Holden’s Elizabeth plant in South Australia, although Holden chairman and managing director Mike Devereux has previously suggested the Cruze small car that’s built there now and also produced in other plants around the world would make sense for local production longer term.

Small cars now make up almost one in four of the 1 million-plus annual new vehicle sales and the Cruze is the third best seller in the segment, behind the Mazda3 and Toyota Corolla.

Despite media speculation the Commodore will cease local production, its popularity – it’s still Australia’s second best-selling car and was previously the top seller for 15 consecutive years – would suggest it’s also a front runner to continue with local production.

The iconic Holden Ute that’s produced off the Commodore platform is also a big seller and something Devereux has previously said “we wouldn’t want to walk away from something like that”.

As part of lengthy government negotiations Holden is already understood to have determined the models it will produce, although the company isn’t saying anything yet.

“We don’t have anything to announce” said spokeswoman Emily Perry.

Within months Holden is also expected to confirm an export program that will involve rebranding the Commodore as a Chevrolet for the US market.

“We’ve said we will continue to look at niche exporting opportunities where they make sense but we don’t have anything to announce,” said Perry.

Holden’s has a chequered history with exports to the US, sometimes missing sales targets or being thwarted by broader decisions within GM. It exported the Monaro there in 2003 as the value of the Australian dollar began to climb, something that has also hurt exports of the Commodore-based Caprice that’s currently been sold there as a police car in low volumes.

The Commodore was also sold as a Pontiac between in 2008 and 2009 before the brand was shelved as part of GM’s restructure following bankruptcy.

It’s not known what role Holden’s Melbourne-based design and engineering teams will play longer term within the GM world, although they are increasingly playing a broader role as a result of the globalisation sweeping the industry.

Holden has already been heavily involved in conceiving vehicles not sold here; the Chevrolet Camaro muscle car sold in the US was designed and engineered in Melbourne.